Act 60 and the fiscal crunch

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(McClaughry) Last month, with much hand-wringing, the Dean administration and the Joint Fiscal Committee came to an agreement on cutting back fiscal year 2003 spending by $39 million. During all the deliberations, and all the reporting thereof, no one seems to have mentioned the prime cause of this shortfall. That’s the now-annual $36 million appropriation to ease the pain of taxpayers in towns with Act 60’s sharing pool.

Think back to 1997. The Act 60 deal was this: the state would raise around $400 million through a new statewide property tax, add another $200+ million of general fund money, and underwrite the basic block grant per pupil now set at $5,566 dollars.

Towns that wanted to spend above the block grant fell into the sharing pool. Their voters would all vote school budgets. The “local share” tax to raise the spending thus voted would be levied at the same rate on the property of all the participating towns. Thus property-rich Stowe would pay into the pool three or four times what it got back, and property-poor Hardwick would get maybe twice as much back as it paid in. This was called equalized yield.

But Stowe and other property-rich towns raised enough private funds for their schools to avoid the sharing pool. Without the expected revenues from the gold towns, towns expecting to be receiving towns (notably Burlington) turned into sending towns. To forestall the political backlash, the 1999 legislature voted to use $36 million of the then surplus to “buy out the sharing pool.”

The 2000 and 2001 Legislatures did the same thing. So did the 2002 Legislature, even though there was no more surplus to hand out. If Act 60 had been allowed to work the way its authors intended, the towns spending above the block grant would have had to tax themselves to raise the money. The general fund would be $36 million richer. There would be only a three million dollar deficit, and no agony of budge cutting, layoffs, and the like.

The state is now so inextricably wrapped into bailing out the sharing pool that it can’t back out. The state will have to find ways to force school districts to reduce the rate of spending growth. It’s clear what lies at the end of this road: One Big School System, its spending controlled from Montpelier.

What’s the way out of this? Scrap Act 60, and go to empowered parental choice among public, charter, independent, faith-based, for-profit and home schooling, coupled with market-based competition by those schools to give parents what they believe is right and best for their children. With thousands more children attending lower-cost independent schools and home schooling, education costs will level off and maybe even go down. This may be three years away, but it’s coming.

This is John McClaughry – thanks for listening.

John McClaughery is president of the Ethan Allen Institute, a Vermont policy research and education organization.

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